World stocks dipped on Tuesday as renewed AI concerns hit high-flying chipmakers, driving investors to the safety of government bonds as tech-heavy stock markets in Asia and the United States felt the ?brunt of ?the selloff.
Reports of progress by Chinese memory chip maker CXMT fuelled concerns about increased competition from China’s AI players, while Broadcom CEO Hock Tan likened some of the flows into the broader AI sector to “casino gambling”.
The MSCI’s main world stocks index dipped 0.14 per cent, while its broadest index of Asia-Pacific shares outside Japan fell more than 2 per cent to its lowest ?level since late July, led by the region’s AI chipmakers.
Investors have ridden the ?AI wave in the past four years as massive spending powered corporate profits and economic growth, although worries over concentration risks and whether a payoff will come soon enough have weighed.
South Korea’s KOSPI, a market at the heart of the global AI boom, sank more than 5 per cent, in its sharpest one-day drop since mid-August.
Samsung fell 7.4 per cent and SK Hynix dropped 10 per cent. Taiwan’s TSMC declined 1.8 per cent, while AI investor ?SoftBank was 8 per cent ?lower.
U.S. Nasdaq futures fell 0.5 per cent, with ?memory chipmaker Micron Technology down 2.5 per cent in premarket trading and Nvidia dropping 0.6 per cent.
European stocks bucked the trend, helped by limited ?exposure to the tech sector as well as a drop in oil ?prices. The pan-European STOXX 600 rose 0.5 per cent to a one-week high.
“Markets have become increasingly aware of the ?fact that the chip industry, especially on the memory side, is ultimately a cyclical industry,” said Julien Lafargue, chief market strategist at Barclays Private Bank.
“People ?were potentially expecting the sector to remain undisrupted maybe for another couple of years. It looks like the news overnight means that maybe this timeline has to shrink and the competition could be more fierce as soon as next year.”
The benchmark 10-year yield dipped to 5.193 per cent, inching away from the 24-year high of 5.364 per cent it hit last week.
A toxic mix of inflationary pressure from elevated energy prices ?and worries about ballooning government debt has triggered several bouts of bond selloffs in recent weeks, pushing borrowing costs to multi-decade highs across the globe.
Charu Chanana, chief investment strategist at Saxo Bank, said investors were moving back into Treasuries after the recent sharp rise in yields, but she saw it as “a tactical rally”.
“Sticky inflation, elevated oil prices and heavy government borrowing remain obstacles to a sustained bond recovery,” she said.
Traders are awaiting U.S. inflation data on Wednesday for clues on ?the Federal Reserve’s policy path. They are pricing in an 80.6 per cent chance that ?it holds rates steady later this month, up from 51 per cent a month earlier, the CME FedWatch tool showed.
Investor ?attention will also be on US bank earnings this week to get a gauge on the impact of the recent surge in Treasury yields on dealmaking, lending ?growth and funding costs.
Four of the six largest U.S. lenders – JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo – will report results later ?in the day.
Oil prices eased as traders assessed supply risks from attacks on Saudi Arabia while weighing the prospect of additional diesel supplies from Russia. Brent crude futures dipped 1.7 per cent to $104.78 per barrel, holding just below a two-week high touched a day earlier.
The dollar eased from 18-month highs, along with a drop in yields and ?oil prices. The euro last bought $1.1182, while the Japanese yen was at 157.97 per dollar.
Reuters
